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Move the Inflation Goal Post to +4.7% Avg - Yellen
Joe, Janet and Jerome all agree it’s “way too high”. So, perhaps it is. Some of this, however, is political posturing. And Powell may be in sympathy with bankers who don’t like inflation because loans get repaid in cheaper dollars. Who knows?
I’ll take 8% annual inflation and 12% average portfolio returns any day over 2% inflation and negative portfolio returns. And, as long as wages and benefits (ex-taxes) stay ahead of inflation workers shouldn’t be too unhappy either. One “plus” to inflation is that fixed payments on a 30 year mortgage become less and less onerous over the years as they are repaid with cheaper and cheaper dollars, That’s a big help to young first time home buyers.
"I’ll take 8% annual inflation and 12% average portfolio returns any day over 2% inflation and negative portfolio returns."
That's the way that I see it too.
"One “plus” to inflation is that fixed payments on a 30 year mortgage become less and less onerous over the years as they are repaid with cheaper and cheaper dollars, That’s a big help to young first time home buyers."
So tell me, geniuses, how was the Fed and other policy makers supposed to: - Anticipate the Russian invasion of Ukraine and its effects on gas prices? - Prevent supply chain disruptions, which were caused by the pandemic and corporations faulty decisions to cut back too much on production? - Labor shortages and resulting cost increases caused by the pandemic and years of corporations skimping on wages?
Too many people blame government leaders for problems outside of their control and often caused or made worse by poor corporate decisions.
Tar -- we (the People) hire these people to be accountable. They spend most of their time collecting their checks, obfuscating, and dodging responsibility. Harry Truman quipped : "The buck stops here!" At least Yellen confessed her failure. But oh, well, just giver her a free pass? So she can do what, make more mistakes?
What is the alternative to holding people in power accountable? No accountability? I mean this is basic "Civics 101" stuff. Maybe people are too far gone to even care.
You threw some straw man proposals up there to suggest the "helplessness" of policy makers. I do think a "post-mortem" on these colossal blunders is in order. I will start with the following
-Sending Covid checks to people who did not lose their jobs -- and in many cases who were already retired. That should never have happened. -Creating a hostile regulatory environment for N. American oil/gas production, in order to virtue-signal to the ESG crowd. -- Cancelling Keystone is an example. Why on Earth would an accountable oil/gas CEO invest in marginal production if the authorities are determined to "cancel" these industries. Incremental supply was impacted b4 Covid, thanks to the tree-huggers. Where is the accountability? -The monetary base has increased something like 40% since pre-Covid. Whatever the Fed/Govt should have done, they went way, way overboard -- with predictable result (runaway inflation -- which initially created gross asset bubbles to spur a "wealth effect"). -Jerry's Fed should have commenced tightening ~ 1 year ago. There was a very political reason why he did not -- Jerry wanted to be re-appointed, and Biden delayed a decision regarding re-nominating (why, I do not know). The effect: Jerry played "dove" until after Biden re-nominated, fearing a hawkish stance would scuttle his renomination. -- giving inflation a year to be embedded in the economy. That delay means a lot more pain will be needed to fix it.
-- As for the suggestion that "all those other policy makers overseas did the same thing".. I can't speak to that, but the incompetence of foreign policy makers is hardly an argument that Jerry + Joe didn't scr#w the pooch here.
Its a systemic problem in this country, that the people with the most power/authority are seldom held account for their errors/incompetencies. We have a lot of people who tolerate it. -- Which suggests we will continue to experience more incompetencies in the future.
Edmond - Why don’t you also hold business leaders accountable? It was their decisions in many cases that have led to supply chain disruptions, a major cause of inflation. Eg, computer chip makers cut back on production, completely misreading the market demand, which increased. Likewise, much of the gas price increases are undoubtedly due to business decisions to cut back on drilling — not to mention the shortages caused by the war in Ukraine.
Regarding the Fed, they actually starting raising interest rates during the previous administration — eventually backing down under pressure from Trump. If Trump hadn’t intervened, perhaps the Fed would have prevented some of the current inflation. Let’s also not disregard the disruptions caused by conspiracy theorists and others who refused to get vaccinated, causing the pandemic to become worse and worsening the supply chain problems, labor shortages and other economic problems.
Regarding the regulation of the petroleum industry, the changes proposed by Biden are a necessary price we have to pay to combat climate change. If you disagree that is occurring, you are in deep denial of science and simple observations regarding temperatures, storms, forest fires and a host of other changes.
Tar, no problem -- You are fine with the predicament we are in. We can agree to disagree. Enjoy filling up the gas tank, and giving Putin more leverage, not by anyone's intent, but definitely by effect, by burnishing ESG credentials. Since oil production is still needed, we can either produce here -- where environmental standards can be enforced -- or to our 'friends' in the Persian Gulf, and Russia.
I've no problem holding others accountable --- You mentioned CEOs" Sure, agreed. Both parties spent the past 40 years allowing CEOs to offshore US jobs to our strategic competitor. -- The 1st guy to fight it was... Trump. Once upon a time, the US produced the vast majority of chips used in the domestic economy. -- The supply chain mishaps would largely have been avoided if we still produced what we use/need. Why are the feed stocks for most of the pharmaceuticals we consume sourced from China? And the rare earth minerals in our electronics? -- Heck the rapid spread of the virus itself was accelerated because the economy is so very globalized..
In fact, back to the whole "Global warming" issue, if GW is so important, why have the GW advocates not insisted we build locally -- to reduce greenhouse gases from these round-the-world supply chains? -- Their silence on that is astounding -- if they are sincere..
As for 'holding Trump accountable' -- well Trump holds no office, and was fired in 2020, so holding someone accountable who has no current official powers, may be emotionally satisfying, but really, what is the point?
The point of holding public officials accountable is not to do a "gotcha". Its to remove incompetents (or those who do not operate in the public interest) from positions of power, and discourage wrong-headed decisions by the next guys who take over.
Coincident to this thread, in the 6/13 WSJ is an article titled: "How the Fed and the Biden Administration got Inflation Wrong" (its behind a pay/subscription wall).
Fair-use excerpts: (paraphrased) -Yellen urged Biden to spend, to avoid the "austerity path" which Obama took after the GFC. -Powell bemoaned the "long years of underemployment" after GFC. -Dems wanted to spend more to further their social agenda ("Great Society 2.0") -More "relief checks" even when labor shortages were becoming apparent. -“If you look back in hindsight then, yes, it probably would’ve been better to have raised rates earlier,” Federal Reserve Chairman Jerry said in an interview last month. -They blame the "models" for getting it wrong. So I guess their Excel spreadsheet was broken? === Maybe we can put a stake in the idea that the "team" didn't get this terribly wrong. Yellen acknowledged it. Jerry acknowledges it.
-Pay workers to not work. Penalize (oil-) producers to supply. "Gun" the money supply 40%. Guys, this is "Econ 101, aggregate supply & demand. They "gunned" demand by sending out helicopter money, and suppressing the price of money (interest rates), and they constrained supply (aided by paying workers to stay home & not produce).
The "team" made decisions based on emotion, partisan dogma and a lot of "groupthink".
Enjoy filling up the gas tank. Are you better off now than you were 4 years ago?
How many Dem's had their slush money invested in ESG just prior to shutting down the pipe line, shutting down oil leases for land. With Tesla down over 50% for one year hi-low, maybe it's time to dip ?! Well if this was the case , guess they're as happy as the rest of us now !
My main point is that there’s plenty of blame to around. The current inflation is not simply due to actions on inactions by the current administration, but perhaps more so by business leaders and the general public.
Nobody likes high gas prices. However, if that’s what it takes to wean Americans from gas guzzling vehicles, it’s not all bad. I vividly remember the gas shortages and high prices from the late 70s, and it has affected my lifestyle since then. I’ve always driven more fuel efficient vehicles and currently drive a hybrid. I’m paying more for gas like everyone else, but it’s not a huge dent in our budget.
There will come a day when future generations will wonder what we were thinking regarding our energy use and climate change. I live in the Eastern US, which essentially is a giant forest. The forest fires out West will seem like nothing if climate change continues on its track and we start having huge wildfires in the East. Unfortunately, I’m afraid that day is coming.
You're trying to reason in a rational manner with someone who has a personal worldview centered on the belief that he has all of the answers.
He really believes that if only all of the administrative officials in the United States had followed his recommendations exactly, then we would be in fine shape right now. The fact that due to a "perfect storm" of unprecedented external factors every nation in the Western world is now in the same mess means exactly nothing to this person.
History is rich with examples, some very recent, of what happens when people who have belief systems of this type actually manage to obtain great power, and inevitably lead their nation and sometimes much of the world into great grief.
No, we don't enjoy filling up our vehicles right now. And neither does most of the rest of the world. But all would be fine if only he had been running things.
If FED raises by .75%, markets likely rally tomorrow. A 1% move likely results in a larger rally. Anything less than .75 and I think the markets drop more.
I may be “whistling in the graveyard.” But, when I see PRWCX (no matter who the manager) off 15+% YTD, it gives me hope the broader equity indexes are near half-way down to their maximum losses. Check ‘07-09. I think the fund’s around 50% of the way to its losses back than. Could be wrong. Maybe we’re looking at the 1930s again. But I don’t think so. On the other hand, I think inflation is here to stay. Probably OT - Just responding to Sven’s comment comment.
Comments
Joe, Janet and Jerome all agree it’s “way too high”. So, perhaps it is. Some of this, however, is political posturing. And Powell may be in sympathy with bankers who don’t like inflation because loans get repaid in cheaper dollars. Who knows?
I’ll take 8% annual inflation and 12% average portfolio returns any day over 2% inflation and negative portfolio returns. And, as long as wages and benefits (ex-taxes) stay ahead of inflation workers shouldn’t be too unhappy either. One “plus” to inflation is that fixed payments on a 30 year mortgage become less and less onerous over the years as they are repaid with cheaper and cheaper dollars, That’s a big help to young first time home buyers.
That's the way that I see it too.
"One “plus” to inflation is that fixed payments on a 30 year mortgage become less and less onerous over the years as they are repaid with cheaper and cheaper dollars, That’s a big help to young first time home buyers."
Sure worked for us.
(Pat Paulsen and Officer Judy made recurring appearances on the Smothers Brothers; two comics with a deadpan approach)
Tar -- we (the People) hire these people to be accountable. They spend most of their time collecting their checks, obfuscating, and dodging responsibility. Harry Truman quipped : "The buck stops here!" At least Yellen confessed her failure. But oh, well, just giver her a free pass? So she can do what, make more mistakes?
What is the alternative to holding people in power accountable? No accountability? I mean this is basic "Civics 101" stuff. Maybe people are too far gone to even care.
You threw some straw man proposals up there to suggest the "helplessness" of policy makers. I do think a "post-mortem" on these colossal blunders is in order. I will start with the following
-Sending Covid checks to people who did not lose their jobs -- and in many cases who were already retired. That should never have happened.
-Creating a hostile regulatory environment for N. American oil/gas production, in order to virtue-signal to the ESG crowd. -- Cancelling Keystone is an example. Why on Earth would an accountable oil/gas CEO invest in marginal production if the authorities are determined to "cancel" these industries. Incremental supply was impacted b4 Covid, thanks to the tree-huggers. Where is the accountability?
-The monetary base has increased something like 40% since pre-Covid. Whatever the Fed/Govt should have done, they went way, way overboard -- with predictable result (runaway inflation -- which initially created gross asset bubbles to spur a "wealth effect").
-Jerry's Fed should have commenced tightening ~ 1 year ago. There was a very political reason why he did not -- Jerry wanted to be re-appointed, and Biden delayed a decision regarding re-nominating (why, I do not know). The effect: Jerry played "dove" until after Biden re-nominated, fearing a hawkish stance would scuttle his renomination. -- giving inflation a year to be embedded in the economy. That delay means a lot more pain will be needed to fix it.
--
As for the suggestion that "all those other policy makers overseas did the same thing"..
I can't speak to that, but the incompetence of foreign policy makers is hardly an argument that Jerry + Joe didn't scr#w the pooch here.
Its a systemic problem in this country, that the people with the most power/authority are seldom held account for their errors/incompetencies. We have a lot of people who tolerate it. -- Which suggests we will continue to experience more incompetencies in the future.
Regarding the Fed, they actually starting raising interest rates during the previous administration — eventually backing down under pressure from Trump. If Trump hadn’t intervened, perhaps the Fed would have prevented some of the current inflation. Let’s also not disregard the disruptions caused by conspiracy theorists and others who refused to get vaccinated, causing the pandemic to become worse and worsening the supply chain problems, labor shortages and other economic problems.
Regarding the regulation of the petroleum industry, the changes proposed by Biden are a necessary price we have to pay to combat climate change. If you disagree that is occurring, you are in deep denial of science and simple observations regarding temperatures, storms, forest fires and a host of other changes.
I've no problem holding others accountable --- You mentioned CEOs" Sure, agreed. Both parties spent the past 40 years allowing CEOs to offshore US jobs to our strategic competitor. -- The 1st guy to fight it was... Trump. Once upon a time, the US produced the vast majority of chips used in the domestic economy. -- The supply chain mishaps would largely have been avoided if we still produced what we use/need. Why are the feed stocks for most of the pharmaceuticals we consume sourced from China? And the rare earth minerals in our electronics? -- Heck the rapid spread of the virus itself was accelerated because the economy is so very globalized..
In fact, back to the whole "Global warming" issue, if GW is so important, why have the GW advocates not insisted we build locally -- to reduce greenhouse gases from these round-the-world supply chains? -- Their silence on that is astounding -- if they are sincere..
As for 'holding Trump accountable' -- well Trump holds no office, and was fired in 2020, so holding someone accountable who has no current official powers, may be emotionally satisfying, but really, what is the point?
The point of holding public officials accountable is not to do a "gotcha". Its to remove incompetents (or those who do not operate in the public interest) from positions of power, and discourage wrong-headed decisions by the next guys who take over.
Thus endeth Civics 101 class for today.
Also … Some interesting commentary by those “left wing extremists” over at CNBC.
Fair-use excerpts: (paraphrased)
-Yellen urged Biden to spend, to avoid the "austerity path" which Obama took after the GFC.
-Powell bemoaned the "long years of underemployment" after GFC.
-Dems wanted to spend more to further their social agenda ("Great Society 2.0")
-More "relief checks" even when labor shortages were becoming apparent.
-“If you look back in hindsight then, yes, it probably would’ve been better to have raised rates earlier,” Federal Reserve Chairman Jerry said in an interview last month.
-They blame the "models" for getting it wrong. So I guess their Excel spreadsheet was broken?
===
Maybe we can put a stake in the idea that the "team" didn't get this terribly wrong. Yellen acknowledged it. Jerry acknowledges it.
-Pay workers to not work. Penalize (oil-) producers to supply. "Gun" the money supply 40%. Guys, this is "Econ 101, aggregate supply & demand. They "gunned" demand by sending out helicopter money, and suppressing the price of money (interest rates), and they constrained supply (aided by paying workers to stay home & not produce).
The "team" made decisions based on emotion, partisan dogma and a lot of "groupthink".
Enjoy filling up the gas tank.
Are you better off now than you were 4 years ago?
Well yes. +100
Couldn't agree with you more.
Best of luck to all
Baseball Fan
Nobody likes high gas prices. However, if that’s what it takes to wean Americans from gas guzzling vehicles, it’s not all bad. I vividly remember the gas shortages and high prices from the late 70s, and it has affected my lifestyle since then. I’ve always driven more fuel efficient vehicles and currently drive a hybrid. I’m paying more for gas like everyone else, but it’s not a huge dent in our budget.
There will come a day when future generations will wonder what we were thinking regarding our energy use and climate change. I live in the Eastern US, which essentially is a giant forest. The forest fires out West will seem like nothing if climate change continues on its track and we start having huge wildfires in the East. Unfortunately, I’m afraid that day is coming.
You're trying to reason in a rational manner with someone who has a personal worldview centered on the belief that he has all of the answers.
He really believes that if only all of the administrative officials in the United States had followed his recommendations exactly, then we would be in fine shape right now. The fact that due to a "perfect storm" of unprecedented external factors every nation in the Western world is now in the same mess means exactly nothing to this person.
History is rich with examples, some very recent, of what happens when people who have belief systems of this type actually manage to obtain great power, and inevitably lead their nation and sometimes much of the world into great grief.
No, we don't enjoy filling up our vehicles right now. And neither does most of the rest of the world. But all would be fine if only he had been running things.
Wonder if the rate hike will improve the already bearish investor sentiment?